Social Security retirement benefits may or may not be available to today’s young workers when they reach retirement age.
The Social Security trust fund will run out of money by 2034 because it is currently spending more than it is collecting.
Due to the fact that the system is funded by payroll taxes, future retirees can expect to receive their benefits; however, they shouldn’t put their trust in it entirely.
Jon Lawton, a managing partner, fiduciary advisor, and certified financial planner from OpenAir Advisers, said, “In the past, Social Security benefits and pensions from their employer were more than enough to carry a retiree through retirement.”
However, the introduction of the 401(k) shifts the responsibility of saving for retirement from the employer to the employee, he explained.
Most Americans aren’t saving enough for their retirement. Over 15 years, a 55- to 64-year-retirement old’s account balance is only $120,000, which translates to a monthly retirement income of just $1,000.
As many as one in four people in the United States do not have any retirement savings whatsoever.
In the absence of Social Security, what steps can you take to ensure you have enough money to live comfortably in retirement? Here are five ideas to get you started.
1. Invest Your Money
Having a well-stocked savings account is a wonderful thing. It’s critical to have emergency funds on hand, as well as a savings account for larger purchases. However, a low-interest deposit account won’t grow fast enough to meet your retirement needs.
You need to invest your retirement savings in a tax-advantaged account like a 401(k) or an Individual Retirement Account (IRA).
A fee-only financial advisor can provide guidance if you’re unsure about which funds to invest in or how aggressively you should invest. As an additional perk, some employers even provide free financial planning.
Also Read: In order to make his Children’s Social Security Checks arrive at the Correct address, He spray painted his house with the incorrect address.
2. Get Your Full Employer Match
Financial planner and founder of Progress Wealth Management in Denver, Blaine Thiederman, says that many employers will match their employees’ retirement savings, which can help them reach their savings goals much faster.
As a general rule, they will match a percentage of your contribution, up to a certain percentage of your salary.
Some organizations will match your contributions up to a certain dollar amount, regardless of how much you earn. The money is yours to keep, so take advantage of it.
3. Max Out Your HSA
Maximize your health savings account and invest what you have in it if you have a high deductible health plan.
Thiederman argues that Health savings accounts (HSAs) are the most tax-efficient way to put money aside for future medical expenses. Why? You can lower your taxable income and tax bill by making pre-tax contributions. Tax-free growth is another benefit.
The money you don’t use in a year is carried over to the following year, unlike a flex spending account.
To use the funds at 65 for any purpose, not just to pay for medical expenses, you must be of legal age.
4. Get Rid of Debt
As soon as you can, try to pay off all of your debts, including student loans, credit cards, and mortgages. “It’s easier to live without Social Security when you have less money going out each month,” Thiederman said.
Look into refinancing your loans if you can’t or don’t want to pay them off in full during low-interest-rate environments (like now).
Also Read: Social Security: Increasing your Monthly Payments by Delaying your claim.
5. Create a Budget and Stick To It
Last but not least, it’s critical to take a comprehensive look at your finances and figure out where each dollar should be allocated to. “Many clients I’ve worked with have a hard time adhering to a budget,” Thiederman noted.
It seems they never have enough money saved each year. As a result, not only are they scrambling to make up for years of bad spending habits, but they have also missed out on the compounding effects of the market. Once you get the hang of it, budgeting is a worthwhile endeavor.